The machining industry has thousands of CNC machine shops. Many of them struggle to stay profitable and deliver on their promises, and as a result, don’t grow as fast as they want to. A small number of shops are highly effective and grow faster than the rest and go on to have amazing results. I’ve talked with thousands of machine shops around the world and seen the common themes, and of course, with our own experience growing a shop from $0 to $12M in revenue, we have a few thoughts to share today.
There are many more effective habits that are also important, but here are the most important habits we’ve seen over the years.
- Robust Business Processes – These companies focus on their business processes, systems, and the people that will drive those processes. They design their processes to run every aspect of their business, and they focus on getting the owner out of the daily work IN the business, and focus on working ON the business. When a problem arises, they focus on what system broke down and they don’t blame themselves or their team, and instead focus on the process.
- Continuous Improvement – Effective shops are focused on continuous improvement always! They have a mindset of always trying to improve and reduce cost, waste, and variability in their process. They run kaizen events frequently, do value stream mapping, focus on 5S and their employees know the 7 wastes of the Toyota Production System. They know that by focusing on lean and continuous improvement, they will continue to remove waste which will return to the bottom line and allow them to have more money to invest in the business for growth.
- Culture – Culture is king in effective shops. Without an amazing culture, it is nearly impossible to recruit and retain great employees. Great cultures are built on values such as excellence in execution, trust, kindness, care for the team, autonomy, respect, inclusion, and others. If you feel your culture is lacking, I’d suggest developing a set of core values and a mission and vision statement. It’s a great exercise and will help you focus on the things that you care about which will help attract like-minded people.
- Sales Driven – In order to be reliably profitable, which is a cornerstone of growth and success, it’s important to always be selling! I learned this lesson the hard way when in our shop we would only sell when things got slow. Then we would stop selling and focus on delivering all the work we had just sold. It turned into a terrible cycle of feast and famine that killed our profitability. The key here is to always have a focus on doing sales and marketing consistently so that you have a steady stream of good fit RFQs coming into the company. It’s easier said than done, but it’s one of the most important habits you can develop.
- Build-in Quality – If you’re not making good quality parts, you don’t really have anything else that matters. So it’s imperative that you build quality into your processes. That starts with a thorough contract review and manufacturing planning process, to ensure that you’ve covered all the requirements flowed down by the customer. Then you must develop your quality plan to ensure that your parts will be in tolerance, and your processes will be stable. Do 1st part buy-offs, and get a second check from someone else when necessary. Do in-process inspections immediately when the parts come off the machine to ensure the process is stable – and record those measurements. You can’t improve what you don’t measure and record. When you have discrepancies, record them in a non-conformance report. NCRs allow you to analyze issues over time and tackle the biggest problems. And implement a good corrective action process so you can ensure quality issues don’t happen again in the same way.
- Maximize Resources – When you aren’t making chips, you aren’t making money. It’s really important to always figure out how to do more with less in a machine shop. It’s too expensive to throw more machines and bodies at a problem. Focus on keeping your spindles cutting as many hours of the day as possible, with the least amount of labor as possible as well. Some of these solutions are found in the same kind of lean principles from point #2, but it goes beyond that. It is always important to remove activities that aren’t value-added, but combining that principle with a focus on spindle uptime and shop floor velocity can be a powerful combination for high efficiency.
- Have a good ERP – Without a really good fit ERP system, the more you grow the more chaos will grow. Too many companies spend hundreds or thousands of hours building home-grown systems when they should be focused on the 6 points above. Or they settle for a poor fit off-the-shelf system that doesn’t serve their business well. They end up building countless other spreadsheets & systems or buying other software to fill the gaps. The result is a complex system that is very labor-intensive to maintain and they find themselves spending more time trying to make the system work than focused on just running their business and delivering good quality parts on time.
By focusing on these 7 points above, you can grow your CNC machine shop into a highly effective, profitable, and growing business that can support your family’s long-term financial goals, provide great jobs in your local community, and help strengthen our manufacturing economy. I can’t think of many things that are more worthwhile than that.
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By Paul Van Metre